THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

(BEGIN VIDEOTAPE)

BRIANNA KEILAR, CNN ANCHOR (voice-over): The first hurricane of the season is packing pounding rain and intense winds and it's threatening to unleash tornadoes, flooding and deadly rip currents right now.

GOV. PAT MCCRORY (R), NORTH CAROLINA: Don't get brave just because you see some good waves out there. Stay out of the water.

(END VIDEOTAPE)

KEILAR: Wolf Blitzer is off today. I'm Brianna Keilar and you're in THE SITUATION ROOM.

ANNOUNCER: This is CNN breaking news.

KEILAR: This is the breaking news this hour.

It is the beginning, North Carolina starting now to feel the full power of Hurricane Arthur. We're tracking all of the new developments, Wrightsville Beach and the Wilmington area are in the bullseye as we speak, Arthur packing wind gusts above 100 miles an hour and it's getting stronger. Hurricane warnings and watches are in effect for the Carolina coastline, forcing beaches to close and the evacuation of thousands of holiday visitors.

We're standing by right now for a news conference by North Carolina's governor as this dangerous hurricane emergency unfolds.

We have a team of correspondents standing by across this hurricane zone. We're monitoring the storm as well in CNN's Severe Weather Center.

Let's go now to Wrightsville Beach. That's where we find Alina Machado. She's really starting to experience the beginning of this as the bands come and go as the eye of the storm heads toward the coast.

You can see it has started to rain. The wind is starting to pick up. And this is something that we have seen on and often pretty much since the morning. It started to pick up about four hours ago and it looks like now it's starting to be a little more consistent.

We have been talking to officials here. They tell us that so far no major reports of flooding. That's very good news. Some other good news? They were worried about rip currents and people possibly drowning in the beach because they were not heeding the warnings, but that has not been the case here. Officials tell us people have heeded the warnings and they're staying out of the water and so far things are definitely picking up here, but no reports of major damage either -- Brianna.

KEILAR: All right, Alina.

North Carolina's governor said don't be wearing your stupid hat. It appears there that folks there are definitely wearing their smart ones. So, that's good news.

Let's go now to CNN senior correspondent Joe Johns, and he's farther up the coast on the Outer Banks, the vulnerable islands which are really waiting really to see the effects of this.

You're in Kill Devil Hills, North Carolina, Joe. Tell us about it.

JOE JOHNS, CNN CRIME AND JUSTICE CORRESPONDENT: Well, I got to tell you, surfs up is here and it's no joke. The mist has been rolling in, Brianna, the temperature has dropped and officials are warning people down at Cape Hatteras and the Hatteras island area that if they haven't already evacuated, they need to reconsider their decision, a potentially very dangerous situation here on the North Carolina coast.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: It really might be fun, it might be scary, but we're going to find out after while.

JOHNS (voice-over): The ill-timed first hurricane of the season is gaining strength as it barrels up the East Coast, threatening destruction and altering holiday plans. Hurricane Arthur is churning off the coast and could make landfall on North Carolina's Outer Banks overnight as a Category 2 storm.

UNIDENTIFIED FEMALE: We're just prepping. We're tying down stuff, things that will fly. There will be some flooding so we're going to move down the street to our other house. But other than that, we're just going to stay here and ride it out.

JOHNS: But riding it out may not be possible in some areas. Evacuations have been ordered for Hatteras and Ocracoke islands.

MCCRORY: Best thing to do is keep yourself out of harm's way so you don't put any of the Guard or other safety personnel lives in danger. So, if you're going to take action, take it now.

JOHNS: Officials warn that high winds and a direct hit aren't necessary for danger. RICK KNABB, NOAA: In the past several decades, water has taken

more lives than the wind has. The inland flooding due to heavy rain, the rip currents and the waves. We have had a lot of people die in the ocean and then there's also the storm surge flooding. We could see two to four feet of water above normally dry ground.

JOHNS: And up the coast, as millions of people are traveling for the Fourth of July holiday, the advice, be alert and be flexible.

KNABB: Don't presume that based on what you have seen with what the track shows or any information that you have heard kind of in passing that that means that the location you're going to is not going to be affected. And so you want to call ahead to the place you're going and follow what the local officials or the people who are running the hotels down there have to offer for you in terms of what they're expecting in that particular location. But plan safety into your holiday weekend no matter where it is you're going.

(END VIDEOTAPE)

JOHNS: Officials here will be watching very closely, especially on the roads, including North Carolina Highway 12, which is washed out again and again, the storm surge a huge concern here because of the low elevation of the Outer Banks -- Brianna.

KEILAR: And I want to go now to Richard Neal. He is on the phone and he's in what's called the Frying Pan Tower. This is 34 miles off the North Carolina coast. Guess what else is about that far off the North Carolina coast? That would be this storm.

Richard, explain to us. We're seeing some of pictures you have shot. Explain to us what this tower is.

RICHARD NEAL, BUSINESS OWNER: This is a Coast Guard light station that the government auctioned off several years ago, and I happened to accidentally win the auction, and so I have turned it into an adventure bed and breakfast, although not expecting it to be this much of an adventure.

KEILAR: OK. This is not something I was necessarily expecting to hear, I will say, but this is a fascinating view. Tell us what you have been seeing. We're seeing these pictures of the open ocean and the waves just coming by you.

How have things changed over the last several hours as you have been out there?

NEAL: Well, right now we're really lucky to be able to speak because we're literally in the eye of the storm right now. We have seen the winds go up to 99 miles an hour pretty consistently and the waves about 30, 35 feet, with swells even higher. It has been astonishing out here just how much the actual ocean

moves. But we're all safe in here and my kids are actually sitting around playing cards at the kitchen table.

KEILAR: OK. So, if this is an adventure bed and breakfast, do you have people there with you who are staying?

NEAL: This weekend, we will again, but we did not during this week. We were doing a work trip and just happened to be caught in a much larger storm than they predicted.

KEILAR: All right, they're missing out on the grand adventure, I would say, at your adventure bed and breakfast.

But tell us, have you seen anything like this? Have you weathered other storms and how does this compare?

NEAL: This is actually the largest one we have been in out here personally, although this particular facility has been through many of them throughout the years. It's a very tough, old light station.

But in general, I would say that, as I said, back when Sandy was rolling through here, everyone on shore that hasn't already received it should get to safety. These are very large waves and the swells are enormous.

KEILAR: And you're really the first person experiencing the eye of the storm as you're talking to us amazingly from the middle of it. If there are any issues -- obviously the pictures you have taken were previous to now. These are dramatically reduced conditions compared to what you're going through right now.

But can you tell us if there are some issues, who is really there to come to your aid? Are you in this alone, I imagine?

NEAL: I think pretty much that's part of what happens when you take on an adventure like this.

The Coast Guard is excellent, but I wish for them to be taking care of the people that truly need their held. We're very comfortable here, have electricity and power generation and fine. The heavy rains actually filled up our water tanks, if you can imagine that. But, in general, even though the large portion of the storm has just past us, it was tremendously fierce and the facility itself was shaking back and forth, enough to rather unnerve you.

KEILAR: All right. And you should know, having weathered some of these other storms. Warning people there on the coast right there, Richard Neal, fascinating vantage point. Thank you so much for sharing it with us, talking to us from the eye of Hurricane Arthur as this is heading towards the North Carolina coast.

That's where we find Rene Marsh. She's in Atlantic Beach.

Rene, describe the scene where you are, which is sort of in central North Carolina, just south of the Outer Banks islands. RENE MARSH, CNN AVIATION CORRESPONDENT: Well, I tell you,

Brianna, at this point, it's a little bit of wind but right now we're getting just essentially drenched with a downpour here. That's what we have been seeing.

We have moments of really tough bands of just coming through and then we get a quiet moment. And you just caught us a moment where the rain is really coming down.

I'm joined here -- you always have some folks who always want to come out and see exactly what Mother Nature is offering up. We found these two. They were just surfing out there.

Guys, tell me a little bit about what the water was like. You said you felt a lot of pull in a lot of different directions.

UNIDENTIFIED MALE: Yes, a lot of different directions, a lot of waves really fast coming and going, and undercurrent was incredible.

MARSH: You were saying if you're not a strong swimmer, you do not recommend being out here.

UNIDENTIFIED MALE: A lot of people come out here and do this on a regular basis when there's a storm or bad weather. But if you are not a strong swimmer, I do not recommend coming out here at all, because it's unforgiving and it will take you.

MARSH: All right, thank you so much. Get to safer ground.

I do want to tell you this. Where we are, Atlantic Beach, we spent some time at the emergency operations center and we do know that they have been monitoring the weather conditions around the clock. They don't have, at this point, any mandatory evacuations, but what that they do is a curfew in place just hours before the storm is supposed to get really close to the coast here in coastal North Carolina.

So, there will be a curfew starting around 10:00 for some people, 11:00 for others, where they just don't want people on the roads. They want people inside of their homes. Again, the issue is those mean waves that we see building up out there and, of course, that storm surge, they have a lot of low-lying areas and they don't want a situation where you're on the road and now you have water rising in that surge coming in and covering the roadways.

So they do want people to take precaution. But we have a few people out here, but the bottom line is, people are listening. When you look out there, we really don't see anyone, just a few people on the sand observing the really big waves as they continue to build up here and as conditions continue to deteriorate.

But when you look in the water, the good news, Brianna, we do not see anyone taking that risk, and that's exactly what it is at this moment, a risk.

KEILAR: OK, Rene Marsh, stick with us for a second. (WEATHER UPDATE)

KEILAR: Still ahead, though, this thing is affecting a lot of people. There are flights grounded, road trips, of course, canceled. Hurricane Arthur is hitting North Carolina's coast, but it's also playing -- wreaking havoc, I should say, with holiday travel plans far and wide.

We're going to have more on that when we come back.

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KEILAR: Let's talk now to Kelly Baucom.

He's a restaurant and supermarket owner in Wrightsville Beach, which is -- Wrightsville Beach, I should say -- that's really where the winds are picking up right now with Hurricane Arthur just sitting off the coast of North Carolina.

Kelly, so, you own a restaurant, you own a supermarket. I imagine that you have been raided for groceries, right?

KELLY BAUCOM, BUSINESS OWNER: Yes. Yes. They have been coming in buying the bread and milk.

KEILAR: And what are you seeing where you are? How have the conditions changed over the last few hours?

BAUCOM: They have significantly changed. We have definitely 35 to 40 mile-per-hour wind, as we can see. The rain is coming down way harder than it has at any point today.

And we just had a really, really, really bad band that just came through. But we're making it here at Wrightsville Beach and just trying to get through this so we can enjoy this Fourth of July weekend.

KEILAR: What is your concern in this storm?

BAUCOM: My concern is that people that want to come to our beautiful beach and enjoy our beach are going to be afraid that the storm is going to last throughout the whole weekend. But, as we all know, once it's passed, all the beautiful skies come out and it's nothing but beautiful weather.

KEILAR: How big of a deal is July 4 weekend for the tourism in the area?

BAUCOM: Well, we have three weekends a year to really make our money and make our customers happy that come down to our beautiful -- you know, our beautiful beach. And it's very significant that, you know, this storm comes on such a -- you know, such a great weekend.

KEILAR: It's so rare. We were looking at statistics and actually since records were kept, a storm has not really hit that area on July 4 and it really is such a big tourism area. Are you seeing any flooding or anything like that?

BAUCOM: Yes, I would definitely say we have water coming up over past the curbs right now. This is definitely -- the hardest rain has been coming down. And we do have a little bit of flooding.

Our drains cannot really keep up with the rain, what -- you know, what Mother Nature is producing right now. But hopefully with the next couple of hours, everything is going to be great and we will be able to celebrate the independence Fourth of July.

KEILAR: Are you seeing people be safe? Are they staying off of the streets?

BAUCOM: I would say absolutely not. I feel like it's almost like a free-for-all. I feel like all of the people are really just flooding the Wrightsville Beach area wanting to see what the waves and wanting to see what Arthur is bringing.

And I would completely advise everyone to stay away, but it doesn't seem like that's happening.

KEILAR: All right, we certainly have been warning people to do that as well, and we hope that they do stay away, and hopefully they're heeding your words as you say that from the ground there in Wrightsville Beach.

Kelly Baucom, thanks so much for joining us.

And we want to go now up the coast a little ways. This is Atlantic Beach, North Carolina, just south of the barrier islands south of the Outer Banks. And this is where we find CNN's Rene Marsh, back with us now with a dry microphone.

Tell us about what you're seeing there. I see some people mind you, Rene, and it sounds like from the last gentleman we were talking to that, even as the conditions, the bands get better, as we can where you are right now -- you're in between bands, it looks like, significant difference from the last time we talked to you just a few minutes ago.

MARSH: Yes.

Yes, you know, Brianna, that is what we're experiencing. It's just you will get a band and then you will get a couple of minutes, maybe five minutes or so, maybe more, and then you have this dry spell, which is what we're experiencing right now. But what's consistent is the rough surf.

If you look out there, you see things are really starting to churn up. And that is exactly why they don't want people in the water there. But you still have people here on shore taking a look because they're curious. They want to see what Mother Nature has to serve up here.

But we can tell you that we really don't expect to see things get extremely bad until maybe another four or five hours from now. So this is just a precursor of what Hurricane Arthur has to serve up here for the folks along the coastal North Carolina.

Now, we spent some time in the emergency operations center. And they have been monitoring this literally second by second. They have been calling people, elderly people, people in nursing homes who may be in areas where they know it is low-lying, and they want to find out, are these people concerned? Do they want to evacuate? We know that there are shelters that have opened for people who wish to evacuate.

We know there's a curfew in place. And we know that there have been a handful of mandatory evacuations. But for the most part, when you talk to people here, many of them say they're going to just ride this thing out, because, remember, this is a coastal community.

They are used to these hurricanes. I have talked to so many people here who have listed -- I can't even list on both hands how many hurricanes they have lived through. They have this attitude if they're not told they have to leave, they will not leave -- Brianna.

KEILAR: All right, Rene there for us in Atlantic Beach, thank you so much.

And let's go now to Buxton, a little further up the coast. This is near Hatteras.

And we're going to talk now with Father Fred Smuda. He's the pastor of Our Lady of the Seas Catholic Church, and he actually wanted to evacuate, but he stayed put because many of his parishioners decided they aren't going to leave.

Father, tell us how you came to that decision.

FATHER FRED SMUDA, BUXTON, NORTH CAROLINA: I just came to it. It was the logical choice to do.

KEILAR: So, what is it like where you are?

SMUDA: Right now, the sun is setting.

I can see it a little bit. The clouds are coming in. I'm 15 feet above the land. I'm on stilts. I guess the house is on stilts, because the water does come in at times. I'm wondering what it's going to be. It's kind of nervous just waiting for things to happen.

KEILAR: Sure.

And your house is elevated and ready for any sort of storm surge, obviously, and the hope being that it will go under your house or around your house.

But tell us about why some of your parishioners decided they were going to stay put. Did you urge them to move on out?

SMUDA: No.

Somebody suggested that to me, but I'm just new on the Outer Banks. I have been only here a year, or a year -- almost a year-and- a-half now. And the locals like to stay. If it's not a Category 4 or 5, they're going to stay here. They don't want to leave their house.

If they leave, it's very difficult to come back. We have some hot spots on the beaches up here, and you have that overflow of the waters, so you can't come in. So they want to stay at their place. It's their home. They have no other place to go to.

KEILAR: But -- so the difference for you is being a newcomer to this -- it's really a beautiful area, but it certainly is low-lying. You sort of have the nerves of someone who has never gone through a hurricane in this area before. Tell us about that.

SMUDA: Yes, tell us about that.

I'm trying to tell myself about that. I said that some people were upset at me, some of my family, friends. They were upset at me because I'm staying. But, as I said, it was almost the logical thing to do. I'm comfortable, a little nervous. It's like going into surgery.

You don't know what to expect. But I have tied down a lot of things, so I think I'm ready. We will wait and see.

KEILAR: Well, we certainly hope that you are. We hope that you weather the storm. You're there near Hatteras, which certainly is where the path of the storm is heading.

Fred Smuda, Father Smuda, I should say, thank you so much for talking with us. We really appreciate it.

SMUDA: I appreciate you calling. Thank you very much.

KEILAR: And we will be certainly thinking of you as well throughout the evening.

Now, Hurricane Arthur, along with other storms up and down the Eastern Seaboard, it's wreaking havoc on a lot of travel plans, just as the long Fourth of July weekend begins.

CNN's Alexandra Field is joining me now from New York's La Guardia Airport.

You're really feeling it up in New York there.

ALEXANDRA FIELD, CNN CORRESPONDENT: Yes.

Brianna, you know, we don't have the effects of Arthur here just yet, but weather is definitely creating big problems. Nationwide, we're seeing hundreds of flights have already been canceled or delayed, here at La Guardia, same story for dozens of flights.

Just check out the board behind him. You can see just a full slate of flights have been canceled. And this is all because of the threat of thunderstorms this afternoon. This is affecting airports across the New York City area. What we're seeing is that in-bound flights have been delayed

between four and five hours. Outbound flights are delayed between one and two hours. That's here at LaGuardia, at JFK, over at Newark. So that's all because these thunderstorms which are coming in.

Add to the weather that's forecasted now, is the fact that we already had a number of thunderstorms last night. So the airlines today had to play catch up. And we know that this is not the kind of weekend when you want to be playing catch up. This is the busiest holiday travel week of the whole summer.

Of course most people drive during this week, that Wednesday through Monday travel period. About 41 million people expected to travel, 35 million of them in cars. But for the six million people who are flying this weekend, well, they're going to get to the airport, and Brianna, they're going to see something that they don't like.

KEILAR: All right, Alexandra. Thanks so much. Keeping an eye on things there at LaGuardia in New York City.

Now coming up, we have the latest as Hurricane Arthur swirls up the Carolina coast. There's also severe weather inland as Washington, D.C., right where we are, getting hit by this stormy weather, as well.

(COMMERCIAL BREAK)

KEILAR: This is our breaking news. You're watching these pictures live from the Outer Banks of North Carolina. Hurricane Arthur is pounding the coast of this state and here are the latest developments. The hurricane is packing sustained winds of 90 miles an hour. There are gusts over 100 miles per hour. And this is forecasted to get stronger. Reaching Category 2 status the evening. Very serious business here.

Storm surges of up to five feet are expected. Deadly rip currents offshore already in effect. And flooding likely in inland areas. Tropical storm warnings are now up as far north as Cape Cod, Massachusetts, and Nova Scotia, Canada.

And let's get a check-in now with our severe weather expert, Chad Myers. It's interesting, Chad, you look at where our reporters are, and you see that things are changing by the minute, alternating between, you know, severe weather and being in between the bands of this rain and wind.

CHAD MYERS, CNN METEOROLOGIST: One thing that hasn't changed -- and it's hard to see from our picture -- is the wave action that's coming on shore, taking that beach away from North Carolina and throwing it a thousand yards out into the ocean. Eroding that beach, eroding the dunes, taking away some of the roadways and some of the bridges before we get done here across the Outer Banks.

We know that U.S. 12, North Carolina 12 is always a mess after a land-falling hurricane, and that's what we have. Reid Wiseman, though, from NASA, from the space station took that

picture of what is Arthur. Just came down in the past few minutes. That's what it looks like from space.

I know we always show you the satellite, but it's not the same as someone actually taking a picture and tweeting it back to earth.

Here's the storm. There's one of our reporters right there. That's Alina Machado, about to get the northern eye wall, about as bad as it's going to get. But all of this water piling up here in this arc, this arc right here acting like a catcher's mitt, holding all of the water. And before this is done -- before this is done, a lot of people aren't going to believe how much of the beach is gone or if there's any beach left. Some of the houses may -- across the street may now have beachfront property.

That's -- when you get 100-mile-per-hour winds pounding on shore, that's what you're going to see. So this is what it looks like, Carolina beach, the waves coming in almost on the bottom of the picture right now. It was low tide about an hour ago. It is no longer that. The waves are piling up.

This is what it looks like at Kure Beach. A low tide right now, and there's the barrier. That right there is the beginning of the dunes. The waves only about 10 to 20 feet from the dunes.

We still have another five hours of high tide to go. This water will be in these yards, in these dunes, and there are some homes just back out to the west of there.

So here's what we have for the next few hours. One band after another affecting all of these cities up and down the southeast part of South -- North Carolina.

Something else we're seeing right now, just noticed it, an inner eye wall. Inner eye wall right there. That inner eye wall is developing. That's the part that will have the Category 2 hurricane winds as they develop later on this afternoon. Maybe two more, maybe three more hours. This storm will be the 100 mile-per-hour storm. And that eye is going to go right through there.

We have reporters here and more reporters on the cape. This is going to be a long night for people there in the Carolinas. We'll try to keep you advised.

KEILAR: Yes, and even longer, Chad, because we're just getting word of some of the power outages: 7,300 power outages in North Carolina right now. That's really one of the hallmarks, right, of a Cat 1 or a Cat 2 hurricane?

MYERS: Yes, absolutely. We're going to lose power lines; going to lose the power poles. And they take a while to go back up, of course. And I just -- I saw here just a little bit ago -- I don't know if I have this picture or not. But here it is right there, kind of from the wrong angle. There were people still in the water, and the winds are 70 miles

per hour here at Kure Beach, and the waves are six to ten feet. I saw a few people jumping in the waves right now. Those are the people the government was talking about. Please don't put the hat on and so...

KEILAR: The stupid hat.

MYERS: They're finally out of the water. I didn't want to go -- there they are right there. They're standing on the beach. I didn't want to go there, but you called it.

KEILAR: Yes, I did call it. You've been saying people would do this, and I thought, no, I'm sure we won't see that many people doing it. But you're right. People are.

MYERS: No, they're right there. Bottom of the screen right now. The zoom keeps going in and out, trying to show you the entire beach. But no.

KEILAR: Get off the beach.

MYERS: You can't tell them anything. I remember back when Ali Velshi was standing in Atlantic City, and I think it was -- I think it was the governor, Christie, that said, "Ali, get out of the water." That's all I can yell right now. Get out of the water.

KEILAR: Right. Get out of it. Get away from it. Don't even be near it.

All right, Chad Myers, thanks so much.

We want to bring in CNN's Tom Foreman now. You've been checking out the surf cameras, which normally folks use to see what the surf is like, if they should go out and catch a few. But this is giving you a real live look at what's happening.

TOM FOREMAN, CNN CORRESPONDENT: Yes. And you can see exactly what we've been talking about all evening here, this notion that place to place to place looks very different.

When you're talking about things way up in here, you're not going to see a whole lot. A little bit of waves.

But let's look at some of the cameras down in the area down here where the storm is really sort of grinding in. If you look at those, you can see that some don't look that intense. This is near Topsail Island. And yes, there are waves here. This is exactly what Chad just mentioned, though. This, nonetheless, works away at that sand, works away at erosion. You can see the big waves coming up under the piers here.

So there's some real power here. Let's move on to another view from one of these other surf cameras here, because this is giving us a chance to look place by place by place.

Carolina beach much more intense here. This is because of the rain falling down. And when you talk about these band and you talk about the way in which it pounds in, this is what we're talking about. Some areas very intense. A few miles away maybe not so much.

Let's go look at one more camera here. I'll talk about why this matters so much. Because those few miles from one camera to the next can make an extraordinary difference in terms of the cost of these storms. Of course, lives are the first concern. And in about eight counties along North Carolina to just the edge of Virginia, we've calculated about 1.1 million people immediately living in this area.

If you look back to Hurricane Irene in 2011, they had 65 million people considered to be overall involved, because that's when you count everything up in New England and everywhere through there.

But the reason the White House is watching, the reason so many of these business people and these government leaders are watching comes down to this. And I'll bring you over to this map, just to talk about it for a second.

When you talk about the coastal areas of this country, we have moved so much into coastal areas on the Gulf Coast, the West Coast, the East Coast, that now 45 percent of the nation's economy, of the GDP. of everything we produce and sell, comes from coastal areas of this country. The coastal area may come a fair bit in, but 45 percent of it.

And this area from up here to down here, this area alone accounts for around $320 billion worth of business a year, and a lot of that counts in the summer trade and what should be going on right now. This is about the immediate threat. It's also about the long-term impact if this storm grinds away.

KEILAR: Yes, and that's what we heard from the restaurant owner we talked to. He's so worried that people will stay away, because that is a big weekend and not one that a hurricane often will hit this area.

FOREMAN: That's a small business owner that we talk about...

KEILAR: Exactly.

FOREMAN: ... who creates jobs. It may sound like one restaurant, but you multiply that by an awful lot of people...

KEILAR: Yes.

FOREMAN: ... and that has a genuine impact.

KEILAR: Yes. They're expecting, I think, the population just of the Outer Banks to more than quadruple during this big weekend. Tom Foreman, thank you for explaining that for us.

Now Hurricane Arthur is expected to lash the North Carolina barrier islands for hours. That's the Outer Banks that we were talking about. We're going to go now to CNN senior correspondent Joe Johns. He is there on the Outer Banks. He is in Kill Devil Hills, North Carolina.

It looks kind of -- are you getting a little bit of rain there already, Joe?

JOE JOHNS, CNN SENIOR CORRESPONDENT: Not rain. But there is some mist coming in. The waves are really whipping up. And it looks a lot more like a hurricane is headed here as opposed to 24 hours ago.

You know, 250 million people -- or 250,000 people, I should say, here supposedly along the Fourth of July weekend. No way to tell how many of those people are actually going to go away or try to come back or whatever.

But here are some people here. I thought I'd just walk up and say, "Hey, it's Joe Johns with CNN. Where are you from?"

UNIDENTIFIED MALE: Carroll County, Maryland.

JOHNS: And how long have you been here?

UNIDENTIFIED MALE: We came in Saturday, and we were supposed to leave Saturday, but we may end up leaving tomorrow. We've never been in a hurricane.

JOHNS: Worried about this? What's your mindset?

UNIDENTIFIED MALE: Not really. Everybody else is staying, so why not?

JOHNS: For sure. And sort of disappointed about the July Fourth weekend?

UNIDENTIFIED MALE: Yes. We wanted to stay until Saturday and see the fireworks, of course, tomorrow night.

JOHNS: But they shut the fireworks down, and it's going on Saturday or Sunday or Monday.

Rene, I see the conditions getting a little windier since the last time we spoke.

RENE MARSH, CNN CORRESPONDENT: Yes, well, the wind comes and goes. At this point, Brianna, we don't have any heavy rain. We had some heavy rain the last time we spoke to you.

But I want you to take a look. You can see people are out here, but they are being smart about it. They are on the sand, and they're looking at the very, very rough surf, although I do see in the distance now a couple of daredevils out in the water, and that is something that they -- as you know, we've been saying all day, not a good idea.

I have been following all of the emergency management teams on Twitter and we now know that here within this area more than 7,600 people are reporting power outages.

So, we're starting to see that sort of effect as well, not just the weather and the elements but people starting to lose power. But again, we're just feeling those outer bands once in a while we'll get a band of rain. And we're in a quiet period. When we get in those quiet periods, that's when you see everyone kind of come out to observe and see what is happening at any given moment.

I see some folks coming down here. They've been hanging out. You guys come on over, tell me where you're from, what you're doing, why you're out here and not somewhere a little drier.

We'll talk to you, ma'am. What's your first and last name?

UNIDENTIFIED FEMALE: Paula Bowen.

MARSH: OK, Paula. So, I know, you guys were inside, indoors, but you ventured out once the rain stopped.

UNIDENTIFIED FEMALE: Right. It's not that bad yet. The wind hurts out there, the sand blowing. The girls wanted to see what it was out here. We've been watching it on the news and we saw that y'all are all up and down the East Coast. I think it's in Wilmington, headed this way now. So --

MARSH: All right. Thank you so much. You guys stay safe.

So, as I see, again, Brianna, you know, right now we have this lull. Of course as the time goes by, the more time passes and this storm gets closer to the coast, things will change.

Back to you, Brianna.

BRIANNA KEILAR, CNN ANCHOR: All right. Rene, thanks so much.

And coming up, we're going to head back to the outer bank where the team is fanning out and really starting to feel Arthur's power there firsthand.

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KEILAR: Now, Hatteras Island -- or I should say, actually, let's talk about Hyde County. This is the county when you look at the outer banks, the barrier islands there of North Carolina, just inside of that, beyond the barrier islands, you have Hyde County.

We're now just getting word that there is a mandatory curfew that's being put in effect as of 10:00 p.m. tonight. And that alcohol sales have actually been banned already as of 5:00 p.m. tonight. Mandatory curfew there in Hyde County, obviously, concerns about safety as we're looking at this storm tracking up North Carolina's coast. And it's expected to either go right near or on top of the barrier islands there just off of Hyde County.

We also want to talk about Hatteras Island. This is the island. One of the southern islands of the outer banks that has been under a mandatory evacuation order. The one that is, I should say, from Dare County officials. This has been since early this morning. No one has even been allowed on this island.

And joining me now by phone to talk about this is Dare County manager Bobby Outten.

Obviously, some pretty big concerns there, Bobby, but tell us what really is, I guess, in the forefront of your mind when you're looking at this storm heading toward you.

BOBBY OUTTEN, DARE COUNTY MANAGER (via telephone): We have hurricane force winds heading to Hatteras Island. We made the decision on Hatteras Island, it's a narrow island. So, we have one road in, and one road out. And when that road gets cut, then the safety of all citizens becomes imperiled.

So, we need to get the people out of harm's way, get them out of there so that they are safe because responding to problems there post- storm becomes difficult when the roads are breached.

KEILAR: No. Certainly, at a certain point, people are almost on their own as people who first responders are really limited in what they can do. Are you seeing people heed the warnings here and behave in a careful manner? OUTTEN: I would say, yes. I was up at 4:00 this morning. As I

was riding down 158, the main thoroughfare here, there was a steady stream of traffic heading north, which is the exit route from their country, through the northern areas, where most of our visitors come from. So, yes, throughout the day we've had a steady exit of cars and we believe the people and our visitors especially have heeded our warnings.

KEILAR: So, are you expecting for there to be power outages?

OUTTEN: I will expect there will be at least intermittent power outages through the night as the hurricane winds come through. We've been in touch with the electrical companies. They've got their crews standing by. And so, we don't expect any long-term problems, but there would probably be some during the night.

KEILAR: All right. Well, we'll be keeping an eye on things with you, Bobby. Wishing you the best of luck there in Hatteras Island, which is under mandatory evacuation.

Now, up next, storm warnings not just in North Carolina. There are storm warnings that are all up the East Coast. We'll be showing you where this dangerous storm is headed. Chad Myers will give you the latest from our hurricane center.

CHAD MYERS, AMS METEOROLOGIST: I'm seeing an inner eye wall right now. And that's concerning because the smaller the eye gets, the stronger the winds get inside that. Just like an ice skater when she brings her arms in, standing on one leg, that ice skater starts to spin much faster. We're seeing that secondary inner eye wall right there. And that is headed right here, right to Morehead City, there's Atlantic Beach, right up there, those are the outer banks, exactly as we expected, exactly as forecast by the National Hurricane Center to become that category 2 hurricane at 100 miles per hour.

We'll have to see if that actually happens but right now, it's looking more and more likely when we talk about that eye wall getting smaller and smaller.

You can see the eye wall right through here. It's been ragged a lot of the day. Still looks ragged right now, but as the radar picks it up, the radar is faster than satellite. Satellites only come down about 15 minutes, radar every three to seven minutes.

Here's Kerry Beach here just to the southeast. You can see all the wave action coming in, only about 20 feet of beach still left right there. And here you go, this is another picture. This would be Wilmington, maybe Carolina Beach not that far from Wrightsville, waves coming in.

But when it's not raining, when it's not raining, the winds really die off. That's what we've been seeing here in between bands, one band here. This is Alina Machado had just winds about 65 miles per hour. Then they've died off. They've died off right now, but they will be back with the northern eye wall, at least 50 to 60 next time.

And as the eye wall strengthens, we're talking about 70 to 80- mile-per-hour winds. And eventually tonight, as it makes its way right on up into our next live location, up toward Atlantic Beach and up in here to Morehead City, we're talking 80 to 90 miles per hour. That's about three to four hours away. But it keeps going from here -- Brianna.

KEILAR: All right. Chad, thank you so much.

And thank you so much for watching. You -- I'm Brianna Keilar in THE SITUATION ROOM.

And ahead, stay with us for our hurricane coverage continuing with Jake Tapper and Brooke Baldwin.